Sentiment Indicators
200-DMA INDICATOR :
This indicator measures the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averages. The 200-DMA is considered important as it is one of the basic technical indicators that can be used to determine the long-term trend of a security. Almost 72 per cent of the stocks that con-stitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 28 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 6 per cent of the stocks of Nifty have surged above their 200-DMAs. In the last five trading sessions, only one stock, i.e. Cipla has plunged below its 200-DMA while four other stocks, namely, Adani Ports, HDFC Bank, Tata Steel, and UPL closed above their 200-DMA.
On a WoW basis, Nifty rose by 303 points or 1.76 per cent. From Monday’s low of 16,891, Nifty has shot up by nearly 578 points or 3.4 per cent. On the same day itself, about 40 per cent of Nifty 50 stocks slipped below their 200-DMAs, which is the highest since the last 278 trading sessions but a strong pullback witnessed in the next two days improved the situation. This week, the difference between the index close and 200-DMA has improved and stands at 8.08 per cent, which was 6.65 per cent in the previous week. We observe that the difference has increased, which indicates that the situa-tion has improved. If this difference increases further and more stocks close above their 200-DMA, we might find Nifty sitting in a comfortable position.
Sectoral Sentiment Indicator :
This indicator basically interprets the number of stocks in the sectoral indices that are trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Currently, all the sectoral indices except Nifty Pharma are trading above their 200-DMA. Among the constituents of Nifty IT, all the stocks are trading above their 200-DMA. Also, Nifty Private Bank is back above its 200-DMA after falling below the key indicator last week. On a WoW comparison basis, Nifty FMCG witnessed the highest fall in the number of stocks closing below their 200-DMA as 6.67 per cent of its constituents have closed below the key indicator. On the contrary, Nifty Bank has witnessed the highest number of its constituents surging above their 200-DMA as about 16.67 per cent of the constituents closed above the key indicator. Nifty Bank is followed by Nifty Auto, which saw a 13.33 per cent rise in its constituents closing above 200-DMA. The sectoral indices, i.e. Nifty Media and Nifty Private Bank have witnessed 10 per cent of their constituents surging above their 200-DMA while Nifty PSU Bank observed this number to be 7.7 per cent.
Nifty Metal and Nifty Financial Services also saw their constituents close above the key indicator by 6.66 & 5 per cent, respectively. Also, Nifty IT, Nifty Pharma, and Nifty Realty see no change in their number of constituents going above/below the 200-DMA. Nifty Bank was seen taking support of its 200-DMA last week but thereafter, took a reversal from there. This is the reason why we observe a large number of its constituents closing above their 200-DMA. The only worry is Nifty FMCG as all the other sectors have shown improvement but Nifty FMCG continues to underperform. The difference between the index closing and its 200-DMA is just 2.72 per cent and this sector would be watched more carefully next week. Overall, seven sectors witnessed more of their constituents surging above the 200-DMA while just one sector saw its constituents plunging below the 200-DMA. This clearly shows that there is a change of sentiment as more indices are witnessing the strength and if these numbers grow further, we can see a broad-based rally in the coming weeks.
Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the mar-ket. Among Nifty 500 stocks, a higher number of stocks reaching 52-week highs and the lesser number of stocks hitting 52-week lows represent a bull market while the opposite, suggests a bear market. On a WoW comparison basis, the average ratio of stocks marking a fresh 52-week high/low last week was 10:9, which improved this week to 11:3 where, on an average, 11 stocks have touched a new 52-week high. On the flip side, on average, just three stocks have hit a new 52-week low. From last Wednesday’s close, Nifty 500 has risen by 289 points.
Nifty 500 was quite volatile this week as it made swings in either direction. On December 6, it made a low of 14,599, and from there, Nifty 500 shot up by nearly 474 points, which is about 3.2 per cent. On Monday, when the market fell drastically, the number of stocks hitting a 52-week low increased to six but the pullback rally in the next two trading sessions saw the number decline to 1. On a WoW basis, we observe that the number of stocks marking a fresh 52-week high has increased. To add further, the number of stocks hitting a 52-week low has actually decreased significantly. This shows that the internal strength of the market has improved than the previous week and a similar trend in the coming week can greatly improve the situation.
(Closing price as of Dec 08, 2021)